One of the first critical decisions when selling your accounting practice is whether to sell internally or externally. We’ll explain what practice owners need to know about selling internally and externally and provide tips for an amicable and profitable sale.
Small vs. Big Practices
A significant factor in deciding to sell internally or externally is the size of the accounting firm. An internal succession is inherently more challenging for small firms because they have fewer staff, resources, and candidates who would fit the criteria of running the practice.
Selling internally is easier for large firms with established human resources and recruiting departments because they have the resources to find quality candidates and promote from within.
There’s nothing wrong with selling internally as a small practice! Finding a quality candidate is typically harder.
Internal Sale Options
If you decide to sell your accounting practice internally rather than externally, you have a few options for an internal sale. One of the most common is the Employee Stock Ownership (ESOP) transition, where the owner sells stock to a trust for the benefit of the employees instead of directly to an internal candidate.
ESOPs are popular because they offer many tax advantages to the buyer and seller and leave some flexibility for the seller. You could also do a management buyout (MBO) or a leveraged buyout (LBO). In both cases, the owner sells to the management team but provides financing with a seller note in an MBO, or the bank provides funds in an LBO.
What To Consider When Selling Externally
If you choose the external route, you’ll have to consider a few things. Sell to a quality candidate you trust to manage the business and treat the holdover employees fairly. Don’t choose someone who may tarnish the practice’s reputation.
When searching for an external candidate, find someone with experience and success in business ownership, who has the necessary financial backing, and who understands the company culture and how to fit in. Finding a worthy candidate is difficult, but there are resources to help in your search.
Private Practice Transitions Will Help You Sell
If you want to sell your business at a fair price and to a worthy candidate, Private Practice Transitions can help! As a sell-your-business broker, we can get the word out about your sale to interested parties and help you find a candidate that meets all your requirements.
Our team has helped transition hundreds of private practices, and we’ll use that wealth of experience to help you get the best deal possible for your practice and ensure a smooth transition!
